Goldman Sachs Concludes Obamacare Added 500k Jobs

The first Republican attempt to replace Obamacare crumbled before it even hit the House floor last month. But that doesn’t mean the party’s efforts to overturn the lightning-rod healthcare law are over. (See: What If Obamacare Is Repealed?)

Now we have news reports indicating that key Congressional members are devising a new plan that they hope can draw support from the Freedom Caucus as well as more moderate elements in the Republican party.

Does Obamacare Kill Jobs?

One of the Republicans’ central claims about the Affordable Care Act (ACA) is that it kills American jobs. But is that accurate? Not according to Goldman Sachs, which just published a study comparing states that dramatically expanded medical coverage under the legislation with those that experienced only minor changes. (See also: The 5 Industries Driving the U.S. Economy.)

Researchers at the investment bank found that employment in the healthcare and social assistance sectors saw a marked increase after parts of Obamacare went into effect in 2012. Specifically, the authors of the study concluded that for every one-percentage–point increase in medical coverage, healthcare employment increased 0.45%.

Based on the 5.4% increase in coverage nationwide since the law took hold, they estimated that it was responsible for about 500,000 new jobs. That represents 40% of the sector’s job growth during that period.

By contrast, the initial bill the Republicans tried to pass in March would result in 24 million fewer insured Americans over a 10-year period, according to a Congressional Budget Office estimate. Government expenditures on healthcare would fall by $1.2 trillion over that same period.

Body of Research Growing

The Goldman Sachs report comes on the heels of other research also showing a correlation between increased federal spending on healthcare and job growth.

A January report by the non-partisan Economic Policy Institute, for example, suggests that an ACA repeal would lead to as many as 1.2 million fewer jobs in 2019. The organization concluded that because a lack of aggregate demand is weighing down the economy right now – that is, we’re spending less than we’re capable of producing as a country – we’re especially susceptible to a major drop in government outlays.

A recent state-by-state economic analysis by researchers at George Washington University painted an even grimmer picture. It concluded that a repeal of Obamacare would cost 2.6 million lost jobs by 2019, most of them in the private sector. About a third of those positions would be in healthcare, according to their model.

Figure 1. The U.S. economy has gained jobs every month since 2010. According to a Goldman Sachs analysis of the Affordable Care Act, many of those jobs came from the healthcare and social assistance sectors.

Source: The Atlantic

Indeed, growing employment in the healthcare industry was always one of the goals of the Affordable Care Act, according to one of its key architects. As Bob Kocher, a special assistant to President Obama when the bill was being formulated, told Politico, “People on the jobs team were saying we need more middle-class jobs and the best place to create them was in healthcare.”

Of course, what might be a benefit to people in the medical industry may not be great news for the rest of us. After all, consumers of healthcare – and that includes most Americans – ultimately pay the salaries for those new hires. That, theoretically, could translate into higher medical bills.

A Worst-Case Scenario

The Goldman Sachs report does note that the 500,000 new jobs represents the rosiest possible scenario in terms of Obamacare’s effect on the labor market. The number of jobs that a repeal would eliminate could actually be less, the report says, based on “increased demand for other goods and services resulting from the elimination of ACA taxes and from slightly more room for other federal tax cuts or spending increases from the deficit reduction.”

The bank also acknowledges that healthcare employment can be influenced by other factors that their research didn’t take into account. However, it ultimately concluded that a marked reduction in health insurance coverage “would likely be associated with a drag on healthcare employment and healthcare consumption.”

The Bottom Line

This new report is part of a growing body of research that suggests more federal spending on healthcare is actually a boon to the job market, contrary to what some of Obamacare’s critics have asserted. However, that gain could also have negatives, theoretically contributing to higher medical bills for the average American who seeks out medical care. (You may also be interested in reading Trumpcare Is Dead: 'Obamacare Is the Law of the Land.')